By Sam Boughedda
Morgan Stanley cut the price targets of Visa (NYSE:V) and Mastercard (NYSE:MA) in a research note Monday, maintaining Overweight ratings on the stocks.
Visa's price target was trimmed to $282 per share from $291, while Mastercard's was cut to $441 from $457.
The analysts said they are cutting estimates based on FX headwinds due to the large international exposure.
"With both V and MA generating more than half of their revenue internationally, the recent shock to the currency markets likely drives downside to estimates, all things being equal," wrote the analysts.
They added: "Accordingly, in CY22, we reduce our V/MA adj. EPS by ~1-1.5%, while In CY23, the impact is more meaningful given a full year of a stronger U.S. dollar. In '23, we lower our V revenue/adj. EPS by ~2%/~3% and our MA revenue/adj. EPS by ~2.5%/3.5%. Given these lower estimates, we lower our PT to $282 at V ($291 prior) and $441 at MA ($457 prior), but stay OW given our confidence in the travel recovery, with current valuation levels representing a compelling buying opportunity."
Morgan Stanley estimates that Visa and Mastercard 2023 currency baskets are now 200-300bps weaker since their last earnings, and due to the number of countries they operate in, there is an "expansive list of currencies" which impact results.